Cpo Industry

OFFICE OF CHIEF ECONOMIST

August 2011

Contents BI kept rate unchanged and strong 2 p.02 strong 2Q11 figure BOP figure 2Q11 GDP: Increasing Capacity p.06 to Grow Managable Inflation, No More Rate p.11 Expected This Year How Resilient is the IDR Bond p.16 Market? Property sector overview: Greater p.25

Jakarta ASP Up 15.1% YTD

Indonesia Update

BI kept rate unchanged and strong 2Q11 BOP figure Relatively stable inflation and high uncertainty in global market have led the central bank to keep the interest rate flat. Yet, the central bank sees the current impact of global market turmoil to domestic financial market is still limited and can be overcome by policy coordination between monetary and fiscal authorities. On interest rate, we maintain our BI rate forecast of no rate hike for the rest of the year at 6.75%. 2Q11 GDP : Increasing Capacity to Grow Indonesia’s GDP expanded strongly by 6.49% yoy or up 2.87% qoq respectively. Growth momentum was driven by remain robust domestic demand and strong pick up in exports. We expect to see a more healthy growth to continue ahead, as investment spending will likely boost economic capacity. Further explanation will be described in this article. Managable Inflation, No More Rate Hike Expected This Year Consumer price index accelerated 0.67% mom in Jul11 respectively, driven by food prices and school fees inflation. More interestingly, core inflation also came down from 4.63% yoy in June 2011 to 4.55% yoy in July 2011 partly helped by the Rupiah’s appreciation. How Resilient is the IDR Bond Market? During the week of debt problems in Europe and US, the government’s Rupiah bond prices still gained by 1% while the stock market fell 5.1%. This could be evidence that Rupiah bond market performance this year were relatively stable. With flush liquidity in banking system, bonds warehousing by Bank Indonesia and stable of supply government bonds might support IDR bond market. Property sector overview: Greater Jakarta ASP Up 15.1% YTD...